Now, a lot of people, including prominent angel investors and venture capitalists, are starting to listen to him. Tomorrow Ressi will announce a new, basic term sheet for use by investors and founders. The goal is to protect founders and reduce legal fees, which average $50,000 or more per venture round.

Earlier this month angel investor and Hunch founder Chris Dixon wrote a blog post requesting that venture capitalists start to use standard, founder-friendly deal terms for venture rounds. He set out the terms he proposed in that post. Said Dixon: “My preference is to keep all terms as above and only negotiate over 2 things – valuation and amount raised.”

Investor Fred Wilson agreed with Dixon. In a post titled The Ideal First Round Term Sheet, Wilson said: “Chris laid out the ideal set of first round terms and I agree with them. What’s interesting is that Chris is a serial entrepreneur and I am a VC. And yet we agree on what the term sheet should say. That’s progress.”

Now Ressi has published an actual term sheet that investors and founders can use that reflect those basic terms. The term sheet is here, and is also embedded below.

The key terms include the elimination of participation with preferred stock, a 1x liquidation preference, and single trigger vesting acceleration on acquisition.

What this means: VCs try to increase returns by asking for large liquidation preferences. A 3x liquidation preference, for example, means the VC gets to take out 3 times his/her initial investment before founders and employees get anything. So if you raise $10 million at a 3x liquidation preference and then sell for $25 million, founders and emplyees get nothing. With a 1x liquidation preference, the VC is only able to get the initial investment back before others take their share.

More importantly, participation is eliminated. VCs often ask for this. What it means: Participation rights means the VC gets to take a pro-rata share of money in a sale even after the liquidity preference. With it eliminated, the VC has to choose – either take their 1x liquidation preference or convert and share with common pro rata. For any large deal, they will convert and be treated like the founders and employees.

The single trigger vesting provision is also important. VCs like to keep their founders locked up so they have to keep working even after an acquisition. The provision, called double-trigger acceleration, usually requires a sale followed by a firing without cause. VCs want this because it’s easier to sell a company if the founders are locked into staying on. Founders don’t like it because it sucks.

Most importantly, though, is the cost savings. VCs really need to move to a deal structure that doesn’t burn up so much lawyer time negotiating provisions that are almost never used. I could write 10 posts on how this nonsense works, and may in the future. A term sheet like this can be closed with $10k – $20k in legal fees. When you’re only raising $1 million, that’s a big deal.

Also see the Y Combinator investment docs that they published a year ago. Their documents are ideal for small angel rounds, and strip out a lot of the stuff covered in Adeo’s term sheet here. There are some terms included below that are needed in larger deals and which aren’t absurd for VCs to ask for. So both documents are highly relevant. Start with the Y Combinator docs for your first early angel round, and move to Adeo’s document in your first real round of venture capital.

We’ll highlight VCs that we talk to who indicate that they are willing to negotiate deals under these terms.

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